Essential Financial Policies for Business Operations
Examples of Financial Policies
These policies are specific to each financial aspect of the company.
1. Indebtedness to Banks
- Type of funding
- Minimum and maximum amount per bank
- Maximum interest rate
- Minimum and maximum loan term
- Methods of loan repayment and required guarantees
- Acceptable credit agreement requirements
- Characteristics of acceptable banking institutions
- Other acceptable conditions in credit agreements
2. Debt to Suppliers and Creditors
- Payment deadlines for materials, supplies, and services
- Discounts for prompt payment
- Conditions for debt documentation
- Requisition process:
- Operational area request
- Administrative check and approval
- Stock verification
- Purchasing authorization
- Procurement execution
- Supplier communication
- Budget or price verification
- Delivery to shop
- Accounting verification for budget allocation
- Vendor evaluation and selection
- Supplier request
- Credit policy check and assignment
- Delivery to store and invoice
- Scheduled payment
- Receipt issuance and payment record
3. Tax Payment Policies
- Payments within normal terms
- Deferred payment (including company-specific policies)
- Advance payments (utilizing tax exemptions on profits)
4. Financing Fixed Asset Acquisitions
- Negotiating terms with suppliers
- Negotiating bank credits, especially those granted by export agencies
- Compliance with regulatory and federal operational requirements for favorable credit access
5. Long-Term Debt Structure (Over One Year)
- Types of credit agreements
- Debentures
- Interest rates
- Deadlines for interest and principal payments
- Specific guarantees
- Acceptable restrictions
- Acceptable conditions in credit agreements
6. Dividend Policies
- Conditions for dividend payment based on equity and credit agreement restrictions
- Maximum dividend amount per share and as a percentage of annual profits
- Conditions for declaring stock dividends
7. Paid-in Social Capital Increase
- Conditions for financing fixed and working capital needs through additional stock subscriptions
- Methods for share subscription
- Conditions for publicly traded shares, including National Banking and Securities approval
- Circumstances for setting a premium on new shares (based on company risk assessment)
8. Cash and Bank Stock Policies
- Standards for managing and protecting cash and bank deposits
- Operational scale considerations to prevent losses
- Standards for bank operations
- Determination of required banking services and compensating balance agreements
9. Credit and Collections Policy
- Conditions for credit sales and customer creditworthiness criteria
- Interest rates for unpaid balances, including default and bankruptcy scenarios
- Rules for collection activities and risk assessment for granting credit
- Setting credit limits per customer
10. Temporary Investments of Surplus Funds
- Criteria for selecting investment types and determining terms based on rates of return
- Factors to consider when making investments
- Criteria for early payment of obligations at discounted rates
- Guidelines for timing investments
11. Working Capital and Inventory Investment Policy
- Criteria for setting minimum and maximum inventory levels
- Inventory turnover rate analysis for policy adjustments
- Criteria for setting order quantities and delivery frequencies
- Inventory management methods (e.g., FIFO, LIFO)
- Conditions for above-normal purchases:
- Discounts
- Seasonal demand
- Promotions
- Cash payments
- Supplier situation
- Stock requirements
- External factors (natural disasters, etc.)
- Conditions for suspending purchases even when stocks are low:
- Lack of demand
- Unfavorable exchange rates
- Product specialization (technology)
- Conditions for purchasing goods on consignment
- Considerations for vehicle leasing and depreciation
- Criteria for substituting items and suppliers (domestic vs. international)
12. Investment in Physical Assets
- Criteria for equipment replacement vs. continued use with maintenance
- Criteria for equipment upgrades to improve quality, production, or other advantages
- Investment objectives as a key factor in replacement decisions
- Investment performance analysis
- Marginal efficiency of capital analysis
- Net investment considerations and multiplier effect
- Supplier and contractor selection criteria
- Criteria for make-or-buy decisions
- Considerations for unstable input prices
- Mitigating supply and demand effects
13. Depreciation and Amortization of Fixed Assets and Deferred Charges
- Depreciation and amortization methods, considering tax and technical factors
- Criteria for choosing between tax-acceptable and technically desirable methods
- Accelerated depreciation methods
- Basis for calculating depreciation in manufacturing and operating costs
14. Revaluation of Fixed Assets
- Accounting for increases in the value of land, buildings, equipment, and facilities
- Conditions for capitalizing revaluation surplus